CHICAGO (Reuters) - A shareholder of FedEx Corp <FDX.N>
filed a lawsuit against the package delivery company's board on
Thursday alleging the directors exposed the company to damages
by misclassifying employees as contractors.

A FedEx spokesman dismissed the lawsuit as frivolous.

The lawsuit was filed on behalf of FedEx Corp against the
board by the Plumbers and Pipefitters Local 51 Pension Fund, a
shareholder since 2000, in the U.S. District Court for the
Western District of Tennessee. FedEx is based in Memphis.

The pension fund did not disclose the size of its stake in
FedEx.

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The focus of the suit is FedEx's ground delivery unit,
FedEx Ground, which uses some 15,000 independent contractors as
drivers. FedEx describes these contractors as entrepreneurs.

Drivers at rival United Parcel Service Inc <UPS.N> are
represented by the Teamsters union. The Teamsters have been
trying to unionize drivers at FedEx Ground at a number of
facilities.

FedEx is fighting lawsuits in more than 30 states against
this business model, which claim that FedEx exerts so much
control over the behavior and time of these drivers, including
forcing them to buy their own trucks, that they should be
classified as employees. As employees, the lawsuits claim these
drivers should be entitled to benefits.

In November California's Supreme Court rejected an appeal
by FedEx against a state court ruling that the company's
drivers are employees.

The Internal Revenue Service has also tentatively concluded
that the contractors at FedEx Ground should be reclassified as
employees and that the company owes more than $319 million in
taxes and penalties for 2002.

In the lawsuit filed on Thursday, the Plumbers and
Pipefitters Local 51 Pension Fund alleges the use of
independent contractors has exposed FedEx to problems with the
IRS, forced the company to incur tens of millions of dollars in
legal expenses, and exposed it to hundreds of millions of
dollars in damages in lawsuits. The plaintiff also argues the
contractor model has "severely damaged the company's reputation
and goodwill."

"Defendants breached the fiduciary duties that each of them
owed to FedEx Corp and caused FedEx Corp and FedEx Ground to
incur hundreds of millions of dollars in damages, legal fees
and other injuries," the filing said.

The lawsuit seeks damages for FedEx from the board of
directors, and have the company reform its corporate governance
and internal procedures to comply with IRS regulations plus
state and federal labor laws.

"This lawsuit is clearly without merit and frivolous," said
FedEx spokesman Maury Lane. "FedEx has a long record of
providing outstanding shareholder value and is led by a board
of successful and experienced directors who are committed to
the highest quality of corporate governance."